15 minute Rounded Reversal in the DIA

Feb 3, 2009: 3:15 PM CST

I wanted to point out a potentially significant structural change in price that developed today before the close.  We have a confirmed Rounded Reversal on the 15-minute chart of the DIA which is setting up confluence support.

DIA 15-min chart:

DIA Rounded Reversal

Rounded Reversals can be significant because they highlight a clean shift in the balance between supply and demand (sellers and buyers).  As such, we have a confirmed up-trend in the 15-minute chart after coming off a positive momentum divergence and breaking above support via the 20 and 50 EMAs, which are now crossing bullishly at the time this chart was captured (1 hour prior to Tuesday’s close).

It’s a counter-trend retracement swing, but it’s important to note that the reversal is coming off the 800 index level low in the S&P 500 which is proving to be formidable support (the chart above is that of the DIA – Dow Jones ETF).  Any bullish short-term bets are off if we break the current support level, and that of $78.50 in the DIA above, but for now, it appears that the short-term structure has shifted to the upside.

To recap:

Price formed a new low late February 2nd on a large positive momentum divergence

Price has broken above both the 20 and 50 period EMAs

The 20 period EMA is currently crossing above the 50 EMA, setting up the ‘confluence cradle’ trade at $80

Price has completed both a higher high and higher low, officially reversing the 15-min trend.

The 3/10 Momentum Oscillator made a new high along with a new price high, suggesting higher prices are yet to come.

Thus, we have confirmed an official “Rounded Reversal” Trend Change.  However, there’s EMA resistance overhead on each of the Daily Charts of the key Indexes, so don’t get too excited yet.

Corey Rosenbloom
Afraid to Trade.com

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9 Comments

9 Responses to “15 minute Rounded Reversal in the DIA”

  1. Anonymous Says:

    Corey,

    Thanks for the update and comments. Just sitting on sidelines looking for entry to get short. That SPX850-860 level is where battle will begin. That’s my target to put on a swing short.

    I believe were in Wave 5 down now and will play it that way. Wave 1 of 5 of 5 was SPX 877 to SPX 812 now were in Wave 2 up of 5. It should fail between SPX 850-860. That is where I’ll postion short for Wave 3 of 5 of 5. This was should break SPX support near 805 and gets use down to test Nov. lows.

    Now if SPX 880 breaks to upside then were still in a Wave 4 (However very unlikely based on counts)

    Corey – Would love to hear you thoughts.

  2. Corey Rosenbloom Says:

    Anon,

    I’m with you on your comments. This is not a “oh my gosh – bull market rally” but one that should hint shorts to take a breather and wait until we get a reversal into resistance to put on fresh short positions. Let’s not get aggressively short right at this second.

    I honestly teeter back and forth between the “5th of 3rd” which is more bearish or the “5th of 5th” as you say (and I think I lean towards) which would mean we’re closer to the end.

    There are some clear levels now established and a break out of this choppy range will lead to a distinct trend move we can profit from easier. I don’t think we’ll break 900 but can’t rule it out. I’d say overwhelming odds we go down.

  3. Dominick Says:

    Hello Corey, just so I have it striaght, would the ideal “sweet spot” entry specifically be around the 12:00 noon to 1:00 pm low on Feb. 2nd? Right around 79.50? Higher low after the higher high?

  4. Corey Rosenbloom Says:

    Dominick,

    No, I pointed to the highest probability entry with the green arrow after making a clear higher high, clear higher low, and then taking out the recent swing high. Not sure I would call the blip at 10:00am a swing. Also, you want a distinctive higher low, not a double bottom if at all possible. Plus you would confirm the change with the moving averages.

    Though you clearly give up some ground (profit), your best odds come at the green arrow and playing for a big target.

  5. murphblog Says:

    I am bullish for the next two days as well given your convergences. We are also at the bottom of a triangle on the SPY plus there is 8000 support. We also have some distance to the upside from major resistance (83.57 plus a few points above that for 50 ema and sma)

  6. BlakeneyHovisb755 Says:

    I needed this info thanks mate

    regards
    jenny glode
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  9. AtT Best of 2009 Part 1 | Penny Stock Trading System Blog Says:

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